Apple partners with Alibaba amid declining sales in China

ISTANBUL

China’s Alibaba Group Holding has entered into a strategic partnership with US tech giant Apple to develop AI-powered features for iPhones in China, the South China Morning Post reported on Tuesday.

Insiders familiar with the deal say Apple chose Alibaba because of the advanced capabilities of its Qwen AI model, which is regarded as highly sophisticated and a leader in AI innovation.

The partnership came at a time when Apple has been struggling with declining iPhone sales in China, where its absence of local AI capabilities has been seen as a major setback.

CEO Tim Cook attributed the recent 11% drop in iPhone sales in China to the lack of Apple Intelligence, while local competitors like Huawei moved quickly to fill the gap.

In its search for a local AI partner, Apple considered startups such as DeepSeek and ByteDance but ultimately chose Alibaba.

On Jan. 29, Alibaba unveiled the updated Qwen 2.5 AI model, claiming it outperforms DeepSeek-V3, a widely recognized competitor. This development is seen as crucial for Apple, as iPhone sales suffered during the holiday quarter, typically its strongest, due to the absence of expected AI features.

Morningstar senior equity analyst Chelsey Lam said: “The partnership between Alibaba and Apple partially validates Alibaba’s capabilities in AI and Qwen 2.5 Max. Selecting the right partner to deliver a good Apple Intelligence experience will help them reinvigorate iPhone sales in China.”

“While the details of the commercial arrangement between both parties remain unknown, the most significant outcome of this development is that Alibaba now has Apple as a flagship partner, which could attract further collaboration opportunities from other companies,” she added.

Both companies have submitted the AI features they co-developed for iPhones in China to the country’s cyberspace regulator for approval.